16 March 2003

Trevor Cook

So, the pretentiously named "Competitiveness Council" met on 3 March, and has at last agreed, on behalf of the Council of Ministers, a “common political approach” on the Community patent. The Commission, in their press release, have put a positive spin on this, but the measure as now agreed is some way from that which the Commission originally proposed in 2000, and is even further from that which much of industry wanted. It thus remains to be seen what use will in fact be made of it, when eventually it comes into force.

It is not hard to devise a Community patent system, or even for politicians to agree on one. The latest is the fourth such attempt, replacing three previous versions agreed over the last thirty years - those of 1975, 1985 and 1989. None came into force, primarily because of constitutional issues, but their loss was not mourned by industry which regarded them as unsatisfactory both in terms of their cost and the arrangements for enforcing such rights. These two elements remain critical to industry if it is to use the Community patent system as now agreed. Let's see how it measures up to such requirements.

As to cost, at first sight a unitary Community patent, a single right with effect throughout the Community, would seem to be a “no-brainer”. Surely such a right must be cheaper than a bundle of national patents in every jurisdiction in the Community, prosecuted either nationally, or together via the European Patent Office (EPO)? Indeed so, but not every patentee requires protection in every country in Community, and the saving needs to be considerable if the Community patent is to work out as cheaper than securing national protection in only a few major jurisdictions in Europe. This is a strategy which some industries (for example chemicals or heavy engineering) are prepared to follow at present, especially for their less important inventions, choosing to patent only in jurisdictions in Europe where competitors’ factories are based, or where the major customers are located. Against this the Community patent has two substantial additional elements of cost which the systems in the USA and Japan do not have to face – translation into multiple languages, and subsidies to national patent offices.

The new system will still involve a significant element of translation. To start with, it will involve translation of the full patent application into English, French or German (the languages of the EPO, onto which the new system will be grafted) at the time of initial filing where the Community language in which it is submitted is not one of those (which cost is borne by the system under a system of “mutualisation”- ie subsidised by other applicants). The translation element is even greater after grant - namely of the patent claims which delineate the scope of the monopoly granted (which cost is borne by the applicant), into all Community languages. With over 20 languages, after the coming enlargement of the European Union, translation of even the claims alone will not be cheap.

The Commission’s original proposal had official fees, including renewal fees, being no more than required to compensate the EPO for running the new system. However the Member States also wanted a share. The system now agreed specifies that the renewal fees must not exceed the level of the corresponding renewal fees for an “average” bundle of national patents secured via the EPO, i.e. one designating 8 countries and maintained for 10 years. The EPO will keep 50% of the renewal fees and the other 50% will be distributed to the national patent offices according to a distribution key to be decided by the Council of Ministers. The key will be based “on a basket of fair, equitable and relevant criteria. Such criteria should reflect patent activities and the size of the market. In addition, considering the role played by national patent offices” in the new system “a balancing factor should also be applied where Member States have a disproportionately low level of patent activities” – ie subsidies for the less busy national patent offices. Again, an opportunity to make the new system more attractive in terms of cost has been lost.

Not only must the Community patent be cost effective for industry if it is to be used. The arrangements for enforcing the new right have also to be such as to give industry confidence in the system, if they are to use it. The self evident attraction of securing a pan European injunction under the Community patent from a single court is counterbalanced by the fear that one’s patent for the whole Community may be invalidated by that same court – the having “all the eggs in one basket” concern. The system as now agreed will establish, no later than 2010, a single Community Patent Court as part of the European Court of Justice, with appeal to the Court of First Instance. Much of the fine details of the procedure of such Court is still to be finalised, and will factor in the decision of industry as to whether or not to use the system. However until then national courts throughout the Community, including those in jurisdictions in which industry has little faith, will have jurisdiction over the Community patent – a concession to Germany, which has over half the patent litigation in the Community, and which was concerned at seeing its own national Courts, which are regarded by many as working well, sidelined. But the price for this is maintaining the jurisdiction of other national courts, which have fewer supporters. This may not matter too much as even by 2010 there may not be many Community patents to litigate, even in the unlikely event of enthusiastic take up of the new system by industry. It is already 2003, and the new system must pass its remaining stages in the Community legislation (which it will, as the Parliament lacks as to this a power of veto) and has then to be stitched into the European Patent Convention, which will itself require modification. Thus it seems unlikely that the new system will be up and running before 2005. Moreover the EPO is already straining under a massive backlog of work, so there will be few if any Community patents granted before 2008.

So what will happen? The likelihood is that potential users will hold back in the short term, until the new system is further modified, or until at least the Community Patent Court is up and running and has secured a good reputation - however unless there are sufficient applications, there may well be pressure to delay the establishment of the new Court beyond 2010. The Community patent system as now agreed may well be, as Alison Brimelow, Chief Executive of the UK Patent Office has said, “as good a package as we’re going to get.” But that is not the same as saying it is so good a package that industry will use it in preference to what they have at present.